MICHEL MARTIN, HOST:
The stock market is soaring, but stocks are not the only things getting more expensive.
STEVE INSKEEP, HOST:
New reports from the Labor Department show consumer prices continue climbing. And at the same time, the job market is showing fresh signs of weakness.
MARTIN: NPR's Scott Horsley is with us now to tell us more about this. Good morning, Scott.
SCOTT HORSLEY, BYLINE: Good morning, Michel.
MARTIN: You know, higher prices and fewer jobs does not sound like a recipe for a booming stock market. So what's going on here?
HORSLEY: Yeah. The Dow jumped more than 600 points yesterday. All the major indexes closed at record highs, and it's mainly because investors believe the Federal Reserve is going to cut interest rates next week. And stock prices tend to go up when it looks like interest rates are coming down. The Fed has been cautious about cutting rates up until now because policymakers wanted to see how President Trump's tariffs would affect inflation, and those tariffs do seem to be putting upward pressure on the price of a lot of imported goods like coffee. A lot of our coffee comes from Brazil, which is now subject to a 50% tariff. Patrick Riordan is the head roaster at Palace Coffee in Amarillo, Texas. He says prices are going up as a result.
PATRICK RIORDAN: I guess kind of the worst part about tariffs is that the farmers, producers, our importing partners, even our baristas, like, no one is seeing the benefits of these costs rising. It's directly just a tax. And it almost feels like we're just kind of lighting money on fire.
HORSLEY: Retail coffee prices are up more than 20% over the last year, and they jumped more than 3.5% just in the last month. Even with inflation on the rise, though, the Fed is expected to pay more attention to the sagging job market.
MARTIN: OK, the sagging job market. How big of a sag are we talking about?
HORSLEY: Well, the pace of hiring has definitely slowed. Employers added just 22,000 jobs in August, and revised figures show the economy actually lost jobs in June, for the first time since 2020. There was also a big jump last week in the number of people applying for unemployment benefits, which could be a harbinger of rising layoffs, which is something we hadn't seen before. For several years, we had a really strong job market, which meant people had money to spend, and that kept the economy humming along. Economist Julia Coronado, who's with MacroPolicy Perspectives, says a weakening job market could turn that cycle on its head.
JULIA CORONADO: When you start to see that engine stall out, then consumers can become more cautious. Then they stop spending. And then you can move into a negative loop where firms start cutting workers, and then consumers get even more cautious. You know, we're not there yet, but we're closer than we were a few months ago.
HORSLEY: That's what the Federal Reserve hopes to avoid by cutting interest rates starting next week.
MARTIN: And speaking of the Fed, there could be some new faces there when that decision is made. Could you tell us about that?
HORSLEY: Yeah. President Trump has nominated one of his allies, White House economist Stephen Miran, to serve a short-term stint on the Fed's governing board, and it's possible that Miran will be confirmed in time to be at the big table in the Fed boardroom next week. Meanwhile, the president's trying to prevent another Fed governor, Lisa Cook, from taking her seat at the table. This week, a federal judge blocked Trump's effort to fire Cook. But Trump is appealing that ruling, so we don't yet know if Lisa Cook will, in fact, take part at next week's meeting. All this just showcases how the president is trying to exert more control over the central bank, even though when Congress set up the Fed, it tried to insulate the central bank from just that kind of political meddling.
MARTIN: That is NPR's Scott Horsley. Scott, thank you.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
